The core CPI rose 0.23% in December, lowering the 12-month rate to 3.2%. The headline CPI rose 0.39%, pushing the 12-month rate up to 2.9%. The market has discounted today’s CPI report but this was NOT a positive development. Energy prices are putting pressure on the top-line, and core inflation is effectively frozen at over 3% year-over-year. The Fed is likely to be on hold for the foreseeable future.
While December CPI inflation was 2.9%, inflation is much higher in many basic necessities:
- Car Insurance Inflation: 11.3%
- Transportation Inflation: 7.3%
- Car Repair Inflation: 6.2%
- Utility Gas Inflation: 4.9%
- Homeowner Inflation: 4.8%
- Rent Inflation: 4.3%
- Food Away From Home Inflation: 3.6%
- Hospital Services Inflation: 3.5%
Headline CPI inflation is at a 5-month high while core CPI fell, but it remains 120 basis points above the Fed’s target. We have now had over three years of compounding inflation in the United States. Consumers are still complaining about inflation. Consumer prices in December continued on the trend that began after June ’22, rising significantly faster than the average rate before the Biden administration. With the Fed slashing rates and the Treasury starting the fiscal year with the largest deficit ever, prices are set to keep rising rapidly. It feels like 3% inflation is becoming the new normal.
Sources:
https://www.bls.gov/news.release/archives/cpi_01152025.htm
https://x.com/KobeissiLetter/status/1879527705022013788
https://x.com/RealEJAntoni/status/1879526104421257712
https://x.com/MichaelMOTTCM/status/1879527125314871486
https://x.com/soldatthetop/status/1879529678312263989
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